Endowment losses not as severe as peers' drops | Interactive graphic

Though Penn's finances have certainly taken a hit of late, the downturn may not be as bad as it seems.

The endowment is expected to report a loss of 15.7 percent for fiscal year 2009, but Penn President Amy Gutmann expressed relief at this number - "the lowest of any drop among peer institutions."

Additionally, she cited an increased financial aid budget among the University's larger accomplishments given the current economy.

Other Ivy League schools with larger endowments, including Harvard and Yale universities, expect to report losses of at least 25 percent, according to the Wall Street Journal.

Penn's endowment for FY '09, which ended June 30, also significantly outperformed the S&P; 500 index, which was down 26.2 percent.

Chief Investment Officer Kristin Gilbertson said Penn benefited from several decisions: maintaining a core position in treasuries, a "focus on quality stocks" and "a tactical decision to reduce equities by 10 points in early 2008 ... just in the nick of time."

Gilbertson emphasized that she and her team have taken "a disciplined approach" to building up the portfolio, not racing to catch up with universities like Harvard.

Looking ahead, she is "excited that we have the cash to continue investing. We have staying power - we don't need to sell by any means, and our hands certainly aren't tied."

This freedom comes as a result of Penn's highly liquid endowment, with roughly 85 percent of the endowment invested in a combination of fixed income, public equities and hedge funds.

Gilbertson said the market will continue to be volatile, but she sees this as an opportunity for Penn "to take advantage of such dislocations."

In terms of financial aid, Penn has increased the budget this year by $18.7 million, or 16.4 percent, according to Gutmann.

For the first time this September, all eligible undergraduates will receive grants rather than loans in their aid packages. Gutmann emphasized that any student who qualifies for aid by last year's standards will receive a grant.

As a result, she said, the incoming freshman class will be able to graduate loan free.

"There are no strings attached to this program," Gutmann said. "We are spending more on financial aid, especially in the economic downturn."

Still, Executive Vice President Craig Carnaroli wrote in an e-mail that the effects of the economy will be more fully felt in FY '11.

"In anticipation of the reduction of endowment income, the schools and centers in the University have undertaken a variety of initiatives to slow compensation growth, restructure operations, and reduce administrative expenses," he wrote, adding that this "should help to mitigate the impact of the endowment payout reductions."

In terms of immediate cutbacks, Gutmann said, she and her executive team have frozen their salaries, and the only salary increases this year went to Penn's lowest paid workers.

Penn, she said, "remains competitive in the field of faculty salaries."

Other cutbacks include operating expenses, "non-essential" travel budgets, and temporary employees, according to Gutmann.

The University is also slowing hiring of new professors, but current professors and their path to tenure will not be affected.

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